serial infringement may justify liability under Tiffany v. eBay

Mori Lee, LLC v. Sears Holdings Corp., 2014 WL 4680739, No. 13cv3656 (S.D.N.Y. Sept. 8, 2014)
Mori Lee, a dressmaker, sued Sears for trademark infringement and unfair competition.  In 2010, Sears opened an online marketplace at where third-party merchants could sell directly to consumers.  Defendants UiMobile and Better Deals sold allegedly counterfeit goods on the marketplace. They allegedly used photographs of Mori Lee dresses, falsely associated Mori Lee’s name and marks with their dresses, and sold inferior imitations of Mori Lee attire.
On May 3, 2013, Sears got two emails charging that several of UiMobile’s counterfeit dresses infringed Mori Lee’s marks.  “Sears investigated those complaints promptly and banned the UiMobile listings identified in the emails, as well as all listings advertised by UiMobile that mentioned a Mori Lee product or dresses made by Siris.”  On May 31, Sears learned of this lawsuit, which listed UiMobile Marketplace advertisements as well as a Better Deals advertisement, though the dress in that ad was not identified as a Mori Lee.
Sears took no additional action against UiMobile because its ban on all UiMobile bridal dress-related listings continued in place. Sears investigated the allegations about Better Deals but didn’t find any Better Deals listings using the Mori Lee name; Better Deals primarily advertised electronic goods. On June 18, 2013, Sears discovered a Better Deals ad using a Mori Lee photograph, and Sears banned that ad, as well as any other Better Deals advertisements with “Mori Lee” or “Siris” in their product listing. Mori Lee identified an additional infringing Better Deals ad, which Sears took down promptly.
Contributory infringement required Mori Lee to show either intentional inducement to infringe or continuing supply of services “to one whom it knows or has reason to know is engaging in trademark infringement.” More than general knowledge or reason to know is required.  Under Tiffany v. eBay, “[s]ome contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary.”  When a service provider reacts promptly to notice of infringing activity by a user, there’s no contributory liability.
Here, Sears got notice of UiMobile’s infringing activity in two emails.  It investigated, removed the ads promptly, and banned UiMobile from posting new ads for bridal dresses or using “Mori Lee.” It also promptly reacted to notice of Better Deals’ infringing ads.  Mori Lee argued that Sears’ policing was less sophisticated than eBay’s.  But Tiffanydidn’t impose an affirmative duty to investigate, and Sears didn’t turn a blind eye to infringement. 
“If that was all, then no contributory liability could be found.”  (Ruh-roh.)  Sears also “had specific information that UiMobile was a serial infringer of bridal dress’ copyrights before UiMobile infringed Mori Lee’s rights.” In March, a different company sent Sears a takedown notice identifying 32 infringing UiMobile advertisements, found under “wedding gowns” and “prom gowns.”  Sears then purported to ban the offending UiMobile ads and informed that company’s counsel that “[i]f you search the web site for ‘bridal gowns,’ you will see there are currently no bridal gowns being sold online by UiMobile.”  Then, that same month, another company sent a takedown notice identifying infringing UiMobile ads.  Whatever the scope of Sears’ ban, it was ineffective, because by May, UiMobile had switched to listing Mori Lee dresses. 
These events raised a genuine issue of fact as to whether “the notice” (unfortunately, it’s not clear whether this is a typo and the court meant to say “the notices” [from the other dressmakers]) “sufficiently informed Sears that UiMobile [was] engaged in trademark infringement.”  In addition, whether Sears was an innocent infringer also turned on these facts. “If Sears is an innocent infringer, Mori Lee is only entitled to injunctive relief—which would likely be moot since Sears has taken down the infringing advertisements.”
False advertising: “In various post-sale emails, Sears represented to purchasers that the dresses bought from the Marketplace were from, for example, the ‘OEM New MoriLee Design Hot Sell Evening Dresses.’”  Sears argued that these emails weren’t commercial advertising because they weren’t made for the purpose of influencing consumers to buy a particular product and they weren’t disseminated to the public, but only to buyers for post-sale shipping confirmation.  The court agreed with Gillette Co. v. Norelco Consumer Products Co., 946, F.Supp. 115 (D. Mass. 1996), which held that a packaging insert accompanying a product and available only after the purchase was made was not “commercial advertising or promotion” because it was inside the package and did not affect the purchase decision. So too here.  Summary judgment for Sears.
Mori Lee’s unfair competition claims were dismissed because they required likely confusion aobut origin or sponsorship.  First, Mori Lee failed to establish rights in  “OEM,” “ML,” and “Ml,” the former of which just means original equipment manufacturer and the latter two of which could refer to other haute couture manufacturers, such as Monique Lhuillier.  Sears did use Mori Lee’s “marks” in post-sale emails, e.g. a shipping confirmation of “OEM New MoriLee Design Hot Sell Evening Dresses BL357” and “OEM New Intricately Beaded Embroidery on Venice Lace Ivory Wedding Dress ML1911.” But this “merely aped” UiMobile’s use of the words in ads by reproducing the product name in the confirmation email.  (Why isn’t this just contributory liability too?)  Sears didn’t make any “independent representation that the product is an authentic Mori Lee dress.” Thus, these acts didn’t cause likely confusion.

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